crvUSD is facing slight de-pegging pressure, and the founder has proposed adjusting the Intrerest Rate to stabilize the price.

Recently, Curve's stablecoin crvUSD has experienced a slight de-pegging phenomenon. In response to this situation, the founder of Curve proposed a measure in the governance forum, aiming to significantly increase the base Intrerest Rate of crvUSD in order to bring its price back to the 1 USD level. This proposal has recently been voted on in the Curve DAO and received a 100% approval rate.

Data shows that the lowest price of crvUSD in the past week was around 0.99 USD, and it has currently rebounded to 0.996 USD. As a soft-pegged stablecoin to the USD, the price of crvUSD should theoretically remain around 1 USD. When the price is above 1 USD, arbitrageurs will borrow crvUSD and sell it on the market; when the price is below 1 USD, although some people buy it waiting for the price to rebound, this practice is not always effective. If users lose confidence in whether crvUSD can be anchored to 1 USD in the long term, it may affect their willingness to hold.

To address this issue, the founder proposed to adjust the interest rate multipliers for all crvUSD markets. Specifically, for non-staked ETH and BTC, the base interest rate will increase from 5.8% to 11%; for staked ETH, the base interest rate will increase from 8.6% to 15%. This adjustment is expected to significantly raise the actual borrowing rates, for example, the borrowing rate for ETH may rise to 13.2%, and the borrowing rate for wstETH may rise to 19.7%.

The expected effect of the proposal is:

1. Increase the crvUSD lending interest rate by raising the base Intrerest Rate.
2. High interest rate pressure prompts borrowing users to buy crvUSD to repay loans
3. The crvUSD price rebounded as the additional interest rate increase caused by the decoupling disappeared.
4. PegKeeper begins to incur debt, and the crvUSD lending interest rate falls below the base interest rate.

It is worth noting that crvUSD adopts a dynamic interest rate mechanism, where the final interest rate depends not only on the base interest rate but is also influenced by the performance of the crvUSD price and the debt ratio of PegKeeper. PegKeeper is a contract specifically designed to manage crvUSD debt, maintaining stability by trading around the pegged price.

Currently, the proposal has come into effect, and the interest rate for borrowing crvUSD by collateralizing wstETH has increased to 19.94%. This may prompt some users to repay their loans. However, whether this adjustment can anchor the price of crvUSD to 1 USD in the long term, and whether the debt of PegKeeper can rise to bring the interest rate down again, still requires further observation. At the same time, the potential impacts of these operations on the application of crvUSD are also worth noting.